The Buffett Rule

It's called the Buffett Rule: a proposal to raise taxes on millionaires. On Tuesday, President Obama officially injected it into the presidential campaign. Is it a matter of fairness or is it class warfare? We take a look on Chicago Tonight at 7:00 pm.

The White House released a report: The Buffett Rule: A Basic Principle of Tax Fairness. The report highlights the need for Congress to take action and pass the Buffett Rule.

Here are some of the highlights from the report:

The average tax rate paid by the very highest-income Americans has fallen to nearly the lowest rate in over 50 years. The wealthiest 1-in-1,000 taxpayers pay barely a quarter of their income in Federal income and payroll taxes today—half of what they would have contributed in 1960. And, the top 400 richest Americans—all making over $110 million—paid only 18 percent of their income in income taxes in 2008.

Average tax rates for the highest income Americans have plummeted even as their incomes have skyrocketed. Since 1979, the average after-tax income of the very wealthiest Americans – the top 1 percent – has risen nearly four-fold. Over the same period, the middle 60 percent of Americans saw their incomes rise just 40 percent. The typical CEO who used to earn about 30 times more than his or her worker now earns 110 times more.

Some of the richest Americans pay extraordinarily low tax rates—as they hire lawyers and accountants to take particular advantage of loopholes and tax expenditures. The average tax rate masks the fact that some high-income Americans pay near their statutory tax rate, while others take advantage of tax expenditures and loopholes to pay extraordinarily low rates—and it is these high-income taxpayers that the Buffett rule is meant to address.

Of millionaires in 2009, a full 22,000 households making more than $1 million annually paid less than 15 percent of their income in income taxes — and 1,470 managed to pay no federal income taxes on their million-plus-dollar incomes, according to IRS data.

Of the 400 highest income Americans, one out of every three in this group paid less than 15 percent of their income in income taxes in 2008.

Many high-income Americans are paying less in taxes than middle class Americans in taxes. Nearly one-quarter of all millionaires (about 55,000 taxpayers) face a tax rate that is lower than more than millions of middle-income taxpayers. This is fundamentally unfair.

Watch President Obama discuss the Buffet rule in the video below.

Congress will have the opportunity to vote on the Buffett Rule next week. Read the full report in the PDF below.